A Good Starter is Hard to Find

Kris Benson: $23 million for three years
Paul Wilson: $8.2 million for two years
Corey Lidle: $6.3 million for two years
Glendon Rusch: $4 million for two years
Armando Benitez: $21 million for three years
Troy Percival: $12 million for two years

It’s early in the free agent season, but Major League General Managers have spent an average of over $5 million a year on significant pitching contracts so far, and a lot of people are scratching their heads over it. Most of the big-name relievers have been signed, but a number of high-profile starting pitchers are still out there, including Pedro (already offered $37.5 million for three years by the Mets), Pavano, Radke and maybe even Clemens. And rumor is that the Yankees are talking about signing Eric Milton to a three-year deal for $25 million!!!! So it looks like the going price for a “good” starting pitcher will jump even higher.

I entered the salaries of the six deals listed above into the Net Win Shares Value calculator, along with each player’s Win Share totals from last year, and found that only two of the six deals returned a positive value even based on last year’s performances. This is very surprising, because salaries have been decreasing the last couple of years, and long-term contracts tend to overvalue future performance, not past performance.

Let’s look at a little more background. Here is a table of all the free agent pitchers signed from 1998 through 2003, including the year the deal was signed, the average salary per year, the average number of years per deal, and the number of deals:

The average payment per year was about $3 million in 1998 and 1999, but it then jumped to the mid and high $3 million range in 2000 and 2001 when some astronomical contracts were signed (think Hampton, Mussina and Chan Ho Park). However, average salary per year fell in 2002 and 2003 to the mid $2 million range, as General Managers seemed to show some restraint the last two years.

On the other hand, there were also a lot more free agent pitchers available in 2003. And a lot of those pitchers were not exactly Hall of Fame material, which might skew the results. So let’s look at a subset of free-agent pitchers. Specifically, let’s look at all pitchers who signed a multi-year contract or a one-year contract worth $3 million or more. This allows us to focus on the best pitchers available in each year.

Using these criteria, the rise and fall of salaries isn’t as obvious, but it’s still there. Last year’s average salary was below the average of every other year except 1999, but so far this year, average salaries are at virtually the same level as 2001 — the previous high-water mark. You might also discern a trend in which salaries are lower when the number of available free agents is high, but I think we may see as many as thirty contracts of this nature this year and salaries appear to be bucking that trend.

The good news is that contract lengths are still under control… so far.

To add a little more perspective, I also looked for previous signings comparable to this year’s Wilson and Benson contracts. This is a very unscientific approach, but my eyeball search found that these were the most comparable deals from previous years (for each deal, I’ve also added Average Win Shares per year of the contract, and average salary paid per Win Share):

In all comparables except one, the average salary per Win Share trended down from 2000 to 2003 (though Thomson, Ponson and Moyer still have to complete their contracts). Another insight: in every year, the two-year deal was more valuable than the three-year deal.

But the main point is that, based on their 2004 Win Shares, Wilson is going to have a tough time matching the value of his comps, and Benson has a shot but only because most of his comps did very poorly. The market for starting pitching is unquestionably going up. The question is why.

Over at the Baseball Graphs website, I have posted some work on Win Shares Above Replacement Level (WSAR). This is very mathematical work, and I haven’t completed it yet (as you can tell from some of the comments to the article). But the concept of Replacement Win Shares sheds some light on today’s subject.

All you really need to know is that I calculated the relative number of Win Shares attributed to players in line to replace the frontline players at each position. A high percentage means that the replacements are pretty good compared to the regulars. A lower percentage means that there are not as many good replacements for the regulars. And I found the following percentages for each position:

Every position comes in between 60% and 70% except starting pitching. The replacement level for starting pitchers is around 40% — just slightly more than half that of all other positions. This finding reinforces the commonly heard complaint that Win Shares undervalues starting pitchers. That will be a subject for another day.

I’m sure that my methodology needs work, but it seems clear that good starting pitchers are in demand because they are hard to find.

Is this a new development? Are starting pitchers scarcer than they used to be? Well, I don’t know the answer, but I kind of doubt it. Perhaps GMs are feeling the dearth of good starters more acutely, for whatever reason. Or there may be some more fundamental structural issues occurring in the market for pitchers, or the market in general. I don’t know.

How much SHOULD pitchers be paid? Well, I don’t quite know that either. But I’ll give you one last data table: this is a table of the salary paid per Win Shares Above Replacement (WSAR) for each free agent who played in the majors last year. I used 65% for the replacement level of all positions except starting pitcher, for which I used 45%. In other words, this is a reflection of how much Major League teams paid for the contribution from each position, taking this new finding (lower replacement level for starters) into account:

Bottom line, even with our new way of evaluating starters, they were still the second-highest paid position in the majors last year. When it comes to salaries for starting pitchers, Major League GM’s appear to be making a bad situation worse.